Market Insight: SUVs take toll on hatchbacks

WHAT a difference 12 months makes. In early 2019, light-car sales in Australia were nipped by an overall downward market trend yet there was underlying strength buoyed by buyers wanting compact and fuel-efficient motoring.

Today, the tide has turned and light cars are not only being overlooked in favour of a new wave of small SUVs, but car-makers are pulling models out of the segment.

Sales figures are muddled by the effects of Covid-19 on the Australian market but the underlying evidence is that the light-car class – which sits under the small-car segment – is well off the boil.

In the first eight months of 2019 it was a very different story. Though sales were still down as Australia endured an ongoing slowdown in buyer demand, the year-to-date August 2019 data for light cars showed it fell 13 per cent on 2018. The small-car sector fell 17.3 per cent.

In the same period in 2020, light cars were off 45.9 per cent compared with small cars at a negative 30.2 per cent.

In quantities, 2019 saw 43,701 light cars sold in the first eight months – in the same period in 2020, only 23,126 units found buyers.

On the face of it, there’s the illusion that buyers are drifting – or remaining – in the small car sector and choosing cars like the Toyota Corolla and Mazda3 rather than looking at the smaller offerings.

But the light-car class is being battered by numerous factors by virtue of its genre.

Aside from Covid-19 and the general malaise of the market, commuter cars are becoming less attractive as using a car in a CBD is expensive to park and – if there’s air quality legislation – expensive to own. People are also prepared to pay for more room.

Then there’s the issue with car-makers trying to balance the need to make low-emission vehicles and get the fleet vehicle CO2 average down to prevent being fined (Europe and some US states), and the annoyance of recognising that small cars return much less profit than larger vehicles. Worse, the smaller the car the harder (and more expensive) it is to design and engineer to meet safety regulations.

The light-car class and the segment beneath it, the sparsely fielded micro-car class, are dominated by the Toyota Yaris, Kia Rio, Kia Picanto, Suzuki Swift and MG’s MG3.

Respectively, this year sales are down 42.6 per cent, 22.6 per cent; 39.1 per cent and 42.2 per cent with a complete turnaround for the MG which gained customers, up 71.6 per cent on the previous year.

In the past year, Ford has retired its once-thriving Fiesta (though the sole performance-based ST remains) and the Holden babies of the Barina and Spark have gone. Only 150 Fiesta sales have been recorded this year.

The knife has been sharpened over the Honda Jazz and its sedan equivalent, the City, with both on the way out. The Jazz has recorded a decent 1630 sales in the year ending August 31 while the City found 166 new owners.

Also destined for the memory books are the Renault Clio, selling only 23 to date, as it makes way for the small SUV model, the Arkana. The Clio typifies the buyer trend away from small hatchbacks and into small SUVs.

Ironically, the arrival of the Arkana into the hot small-SUV sector also means the end of Renault’s pleasant Kadjur SUV, going not because its style doesn’t meet the criteria but because it’s based on an old and soon-to-be retired platform.

It’s worth noting that there’s been a few baby SUVs flicked over the past year. The Holden Trax, of course as the brand becomes obsolete, along with the Indian-made Ford EcoSport and the Jeep Renegade. The Renegade goes but its platform twin, the SUV-styled Fiat 500X, remains.

Other light cars to end their days on Australian soil are the Prius C hybrid which started well as a more compact, city-focused version of the standard Prius. It sold 77 units this year when in previous years used to average around 35 sales a month.

There’s a similar downward trend in the light-car class for vehicles priced at more than $25,000, all fingerlings of European manufacturers better known in Australia for prestige models.

The Audi A1 is back on deck after being away from the market and, in its new model format, has sold 359 this year, up 78.6 per cent on the 201 cars in the same period in 2019.

But that was the only shining light in this upper-price level. The Citroen C3 slipped 29.8 per cent, year-to-date selling just 33, while fellow French model, the Peugeot 208, is now out of the Australian market awaiting approval for its all-new model that is expected mid next year.

Renault’s all-electric Zoe has also been dropped with two sold this year (down from 68 units in the same period in 2019) mainly as buyers overlooked its environmental benefits and balked at its steep $47,490 opening price.

The outlook doesn’t look especially bright and there are inklings that car-makers are reappraising the light-car (and micro-car) segments.

The first sign that things could change was a report in January last year from Volkswagen that said small cars were becoming increasingly expensive to produce. The statement also warned making EVs would take a long time to meet the (meagre) returns from small cars.

It said that to compensate, it could increase the retail price of its smaller cars, such as the Polo. It didn’t, but this month Toyota announced a new strategy for its own baby, the Yaris.

The new Yaris five-door is now priced at $24,990 (including on-road costs) – a leap of $9000 compared with the outgoing version. Its top-spec version is the hybrid, at $34,000, and the GR at $49,500 (though the launch price is $39,950).

At its launch, Toyota Australia vice president of sales and marketing Sean Hanley said the Yaris price rise was triggered by greater safety features and new technology such as the infotainment system.

“This level of pricing and specification is what it takes to bring a car to market in 2020,” he said.

Will next year bring even more changes to the light-car sector and an even greater shift to a reduction in the number of models and a trend to higher prices?